Pin bars are my favourite way to trade price action in the forex markets, they are a reliable candlestick pattern that occurs every now and then. A pin bar is a candle with a long tail, this tail shows rejection of higher or lower prices. If we can see that price “rejected” a certain direction, we can safely say that there is a good chance that price will go in the opposite direction to the tail.
Pin bars on their own do not mean much however. We must learn to read the price action that is on our charts and from this make informed trading decisions.
Support and resistance are two obvious technicals that we should be looking at on our charts. And with the use of pin bars we can often see what the market thinks of levels on the chart. A rejection of a solid support or resistance level by a pin bar is usually an automatic trade for me. But again we must look at the big picture and read what’s going on in the market.
My absolute favourite way to trade pin bars is to wait for price to break a key level in the market, once it has done this I will wait for a retrace to test this level again. If we broke resistance then this level will become new support and vice versa. If price re-tests this level and forms a pin bar we have a very high probability setup.
The best ones are those which close away from their tail. So a bearish pin will have a tail which points to higher prices, the tail shows the rejection of the higher prices. But the icing on the cake would be a close lower than the open, this shows us that the bulls came in and pushed price up, then it reversed intra session and ended up closing below the open. This is an extremely bearish signal.
I will usually enter pin bars at market best at the close of the candle, or wait for it to break the low or high in the direction of the trade. Waiting to see if it will retrace so that we get a better price is not something that I advise and will lead to huge frustration due to missed trades.
These really are a simple price action setup that I believe anyone can learn and profit from. You don’t need indicators and you don’t need to spend all day in front of a computer screen. Checking you charts once a day for setups is all you need to do. Let the market do the work for you.